House of Fraser Seeks Funds as China Rescuer Pulls Out
(Bloomberg) -- House of Fraser Ltd. needs a new lifeline after a Chinese retailer pulled its plan to buy a majority stake, leaving the U.K. department-store chain on the brink of collapse and threatening about 17,000 jobs.
Would-be rescuer C.banner International Holdings Ltd. shelved plans to raise funds for the purchase of a 51 percent stake in the British chain, citing a plunge in its own stock price over the past month. The company had pledged to pump 70 million pounds ($92 million) of fresh capital into House of Fraser after taking control from Nanjing Xinjiekou Department Store Co., a subsidiary of conglomerate Sanpower Group.
House of Fraser's 165 million pounds of bonds due in 2020 fell about 25 pence on the pound to a record-low 30 pence on Thursday, according to data compiled by Bloomberg. The company has total outstanding debts of 390 million pounds, according to a June presentation.
EY is advising lenders and preparing a contingency plan in case House of Fraser collapses, according to two people familiar with the matter, who aren't authorized to talk about it and asked not to be identified. The retailer is also in talks with potential investors including Alteri, Apollo Global Management LLC's unit investing in distressed retailers, according to one of the people. The Telegraph reported on EY's plans earlier, as did Sky News on Alteri's plans, without saying where they got the information.
“House of Fraser is in discussions with alternative investors and is exploring options to obtain the required investment on the same timetable,” the company said in a regulatory filing late on Wednesday.
House of Fraser's struggle to raise cash is another dark turn in the British retail crisis, after the collapse of brick-and-mortar institutions such as Maplin Electronics, the U.K. arm of Toys “R” Us and department-store operator BHS. Store chains are being crippled by pressure from online retailers such as Amazon.com Inc., exacerbated by a rise in costs stemming from the pound's Brexit-induced weakness. Clothier Next Plc's sales growth fell short of estimates in the latest quarter, while retailers Marks & Spencer Group Plc and Debenhams Plc are shrinking store space.
Insolvency Plan
House of Fraser was already seeking to shut more than half its department stores in the U.K. and Ireland through a British insolvency procedure.
C.banner controls brands such as Badgley Mischka. The company also operates a joint venture to promote and distribute Steve Madden products in China. Sales in its main shoe retailing business have slumped in the face of online competition, and the plan to buy control of House of Fraser had wiped out three quarters of its stock-market value.
Sanpower's acquisition of House of Fraser in 2015 valued the British chain at around $623 million. At the time, Sanpower Chairman Yuan Yafei said the company would build 50 outlets in China under the name “Oriental Fraser.” Three years on, only two have opened and Sanpower has turned its attention to building a health-care business.
--With assistance from Antonio Vanuzzo.
To contact Bloomberg News staff for this story: Rachel Chang in Shanghai at wchang98@bloomberg.net;Thomas Buckley in London at tbuckley25@bloomberg.net;Thomas Beardsworth in London at tbeardsworth@bloomberg.net
To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Abigail Moses
©2018 Bloomberg L.P.
With assistance from Editorial Board
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